'Right thing'

Many market economists have been urging the Government to abandon its "political commitment" to a surplus this year, and have this afternoon welcomed the change in policy.

"The Government has done the right thing to drop (its) surplus commitment," AMP Capital chief economist Shane Oliver said.

"Undertaking more fiscal austerity just to get a surplus would have been a disaster for the economy."

Undertaking more fiscal austerity just to get a surplus would have been a disaster for the economy.

AMP Capital chief economist Shane Oliver

An international analysis of Australia's economy released by the Organisation for Economic Cooperation and Development (OECD) last week urged the Government to take a flexible approach to the surplus timeline.

There have also been growing calls, including from within Labor ranks, for the Government to push out the timetable for returning the budget to surplus.

Senior Labor MP Joel Fitzgibbon last week argued it would be good for the economy.

But Ms Gillard responded to that comment by pointing to the most recent forecasts which showed the budget going back in the black in 2012-13.

The Greens are urging the Government to increase the Newstart allowance and build high speed rail now that it has walked away from its surplus promise.

"The next budget should stimulate an economy under pressure from the mining boom and an uncertain international outlook," acting Greens leader Adam Bandt said in a statement.

"Unless Labor stands up to big business and fixes the mining tax, an early political surplus would only happen through massive cuts, which would hurt people, small business and the economy."